According to California Probate Code §16000, a trustee must administer the trust according to the terms of the trust instrument, including any asset distribution plan set forth in the trust document. Because there are many types of trusts and innumerable trust agreements the timeframe will depend on the distribution scheme set forth in the trust document.
For example, if a parent establishes a trust that is intended to provide ongoing support for their child throughout their lifetime, the instrument may call for ongoing, periodic distributions rather than lump sum distributions at the decedent’s death. On the other hand, if a parent feels that their children are old and mature enough to handle a lump sum distribution then the assets are likely to be distributed fully after its creator passes away.
Typically, if a trust calls for a one-time distribution of assets, it will take between 12 and 18 months for the trustee to distribute the assets to the beneficiaries and heirs, depending on various factors, including the complexity of the estate assets, creditor issues, etc. Because the particular requirements vary between trusts, trustees would be well advised to consult with an experienced trust lawyer to ensure they comply with the terms of the trust.
Can a trustee withhold money from a beneficiary?
Yes, a trustee can withhold money from a beneficiary if the trust requires or allows them to do so, or if the circumstances of the trust administration justify it.
In short, whether a trustee can withhold money from a beneficiary depends on the terms of the trust instrument. For example, some trusts empower trustees to decide when to distribute assets and how much to give. Usually, trustees with this high level of discretion can withhold money from a beneficiary if they reasonably conclude a requested distribution is unwarranted.
Other trust instruments restrict when trustees are permitted to distribute assets. For example, a trust may require the beneficiary to complete post-secondary education or reach a certain age before receiving their allotment of trust assets. In these situations, the trustee must withhold money from a beneficiary who requests a distribution that would violate the terms of the trust.
Sometimes specific circumstances of administration justify withholding distributions. For example, in a taxable estate, the trustee will be obligated to have the assets appraised, discount analyses done, creditor claims gathered and vetted, etc., before an estate tax return can be filed. And because an estate tax return is not due for nine months from the date of death, and most estate tax returns go out on extension for six additional months, most taxable estates are not in a position to begin making distributions for at least eighteen months from date of death, although circumstances made require preliminary distributions during that time.
In most case, however, a trustee cannot withhold money from a beneficiary when a trust requires a distribution.
What if a trustee refuses to distribute assets?
If a trustee refuses to distribute assets, there are several legal avenues that a beneficiary can pursue. In some situations, they may be able to file a lawsuit for breach of fiduciary duty against the trustee. They may also be able to request the probate court to order the trustee to make distributions or suspend or remove the trustee from their trusteeship.
If the trustee claims that the trust does not have sufficient assets to make distributions, beneficiaries can request an accounting of trust assets from the beneficiaries. If the trustee does not provide an accounting when requested, a beneficiary can petition the court to order one, and if the accounting evidences wrongdoing by the trustee seek suspension, removal and surcharge for any losses caused by the trustee’s acts or inaction.
Can a beneficiary dispute a trust?
Yes, a beneficiary can dispute a trust through a type of legal proceeding called a “trust contest.” According to California Probate Code §17200, a beneficiary of a trust can file a petition to void a trust if it was not created or funded according to the requirements of the law.
For example, a beneficiary can dispute a trust for any of the following reasons:
- The required legal formalities were not observed when the trust instrument was executed.
- The creator of the trust lacked the necessary mental capacity to make or change a trust.
- The trust was made or changed through fraudulent actions such as forgery.
- The trust was made or changed because of undue influence, duress, or coercion.
Understand, however, that a trust contest will delay distributions during the period the trust contest case is pending. Similarly, most trustees will not distribute any assets until the contest period expires, which, if the trustee timely sends out the required Notice of Irrevocability under Probate Code section 16061.7 within 60 days of death (or other cause of irrevocability) then the contest period can be abbreviated to 120 days from the date of service of the notice. These timing issues are complicated and fraught with traps that should not be examined without counsel.
When should I contact a trust litigation attorney?
If you are the beneficiary of a trust and the trustee refuses to distribute trust assets, you should contact a trust litigation attorney immediately to discuss the situation. Although trustees can sometimes withhold money from beneficiaries, the legal requirements a trustee must follow depend on the trust’s language. An experienced lawyer can review the trust instrument and advise you as to when you are entitled to collect distributions. If a trustee is wrongfully withholding trust distributions from you, a trust litigation attorney can then help you pursue legal action to secure the assets you are entitled to receive.
Have questions? We’re happy to discuss.
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About RMO, LLP
RMO LLP provides personal and efficient inheritance dispute services to individual and institutional clients. The firm’s attorneys focus on probate litigation involving contested trust, estate, probate, and conservatorship matters. Serving California and Texas, with offices in Los Angeles, Pasadena, Orange County, San Diego, Fresno, the Bay Area, Dallas, and Houston. For more information, please visit https://rmolawyers.com/.